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Commentary By Nicole Gelinas

The MTA Meltdown

Economics, Cities Tax & Budget

MTA board members were off to Albany yesterday to beg the state for more money. So far, though, all the pols have given us on the sinking state-run transit authority is political grandstanding.

That the MTA faces a huge deficit is old news—but the hole has grown, potentially to nearly $2 billion, or a whopping 14 percent of spending.

More important, the MTA has almost no money for its next five years' worth of capital-investment projects—two-thirds of which are needed just to keep the aging system in somewhat acceptable condition.

These gaps are catastrophic for the city. Subway and bus decay will add to the economy's suffering.

Yet the pols fiddle.

Nobody wants to ask the obvious question: Is the purpose of the state-run MTA to provide critical mass transit—or to deliver revenue to the politically powerful transit union?

At last week's hearing on how to get the MTA's budget in order, state Sen. Bill Perkins (D-Manhattan), in charge of the authorities committee, focused on how to keep fare hikes to zero.

But Perkins should know that as revenues plummet, fares will head up. The only question is how to keep fare hikes to single digits, rather than 25 percent-plus, so that riders don't flee.

Rep. Anthony Weiner (D-Brooklyn) was worse—asking why the MTA was pretending to be in an emergency, what with the federal stimulus and all.

Weiner should know that the $1.3 billion in "stimulus" for New York's mass transit was laughable—hard to find it in the giant pile of money dedicated to Medicaid. Anything that publicly encourages complacency here is irresponsible.

MTA chief Elliot Sander explained the problems competently enough. But he also brought along a new "cabinet-level" "chief diversity officer" to encourage more minority and women contracting. Ridiculous: What the MTA owes its customers, first, is to keep service running (especially the bus service vital to so many working-class New Yorkers)—and that is now in doubt.

So what should elected officials do if they ever get around to taking this disaster seriously?

The MTA absolutely needs money for its capital plan. And it should be a permanent source of revenue that doesn't depend on annual approval from Albany. Otherwise, the MTA will spend too much time favor-trading with the pols.

But you can't squeeze blood from a stone. For example, former MTA chief Dick Ravitch's proposal to raise $600 million via tolls on the free East River bridges is a good idea in theory. But the sinking economy leaves people much more sensitive to toll hikes than they were a few years ago. MTA bridge traffic fell by 5 percent last quarter. The MTA might well spend money to build toll-collection infrastructure, then find itself collecting less than expected.

Ravitch's other proposal, a payroll tax on downstate employers, is worse. A new income-based tax would make it even more difficult for New York to attract the jobs it needs to replace Wall Street jobs.

The only answer is to find most of the new money in existing budgets—both the MTA's and the state's. There's no way around it: Albany has to start reforming its unsustainable pension and health-care costs for state employees, the MTA included.

Such changes wouldn't take away benefits already earned by current workers. And they wouldn't force retirees to take market risk with their pensions as private-sector workers must. But workers must pay more for benefits that are immensely more valuable than they once were, compared to what's on offer elsewhere today.

If Albany doesn't act here to save hundreds of millions of dollars a year, labor costs will consume the MTA's budget, capital spending included.

As Sander told the pols last week: Even after administrative budget cuts, "expenses not in our control" will keep on rising. Indeed, absent reform, labor costs will have risen by $700 million a year in three years, eating up nearly a third of the new money Ravitch's taxes and tolls would raise.

As for the "draconian" service cuts the MTA's put on the table: They won't even offset rising benefits costs in the city's transit system, not even including the commuter railroads.

Finally, Albany needs to see the MTA's depressing state of affairs as a huge wake-up call to reform the rest of the state budget. With half California's population, we spend $11 billion a year more on Medicaid—and we don't get better results. Cut costs here—and it's easy to carve out more of an existing state tax to give to the MTA.

The downstate sales tax and the gasoline tax are two possibilities that could generate more permanent revenue for transit. But there's plenty more choices, because of the huge variety of taxes New York already levies.

The bottom line: Albany needs to get it together to reform labor and health costs to make permanent room in the budget for the core work of government—including MTA infrastructure. If it doesn't, any fixes now will be temporary—and the city's physical assets will be much worse off and harder to fix.

This piece originally appeared in New York Post

This piece originally appeared in New York Post